Tax in Nebraska: a complete guide

Nebraska income tax  

Every tax-paying US citizen has to pay federal income tax, but most states also impose their own income tax.  

Since 1967, Nebraskans have had to pay a state income tax. However, in 2012 the state reformed the income tax system, cutting rates and adjusting the income tax brackets to make taxes fairer.  

Even with reforms to how Nebraska collects income tax, compared to the 0 percent income tax in neighboring Wyoming, may seem a costly burden for some residents. As well as wages, long- and short-term capital gains are taxed as regular income in Nebraska.  

There are now just four broad income tax brackets in Nebraska:

A single person OR a married person/registered domestic partner filing separately:

A married person/registered domestic partner filing jointly:

A head of household:

Nebraska offers some deductions to their income taxes. 

Firstly, you don’t apply Nebraska’s income tax to your whole income. You will pay Nebraskan income tax on your federal adjusted gross income (AGI). If you’re unsure what your AGI is, you can find it on IRS Form 1040. 

Nebraskans are entitled to a standard deduction from their AGI of $7,350 for a single filer and $14,700 for joint filers. Some residents, such as those over 65 or those who are blind or have a blind spouse, can claim larger deductions. 

You can make further subtractions from your taxable income under some other circumstances, including if you’ve paid contributions to a Nebraska College Savings Plan. Contributions up to $5,000 for a single filer or $10,000 for a joint filer can be deducted from your AGI. 

Nebraska also offers several refundable and non-refundable state tax credits to ease the income tax burden on its residents. These include: 

Nebraska sales tax  

Nebraska has a statewide sales tax rate of 5.5 percent. However, in addition, many districts impose local taxes of up to 4.5 percent, meaning that sales tax can reach nine percent in some places. 

Sales tax applies to most products in Nebraska and some services, including computer software, delivery charges, hotel accommodations, satellite and cable TV, telephone services, detective services, vehicle towing or painting, pest control and security services. However, there are some notable exemptions. 

Nebraska’s sales tax does not apply to groceries (apart from prepared food and food from vending machines), medicine, medical equipment and newspapers. 

Nebraska imposes different tax rates on different types of alcohol. These are: 

Nebraska property tax 

Property in Nebraska varies across different counties. County assessors value properties and determine how much property tax the property owners are liable for. The average effective property tax rate in Nebraska is 1.51 percent, meaning the property owner has to pay 1.51 percent of the property’s value in tax each year. 

Nebraska has 93 in total. The average effective property tax rate ranges from less than one percent to more than two percent. 

Compared to other US states, Nebraska’s property taxes are high and rank as the ninth highest property tax in the country.  

Nebraska motor tax  

Like other goods in the state of Nebraska, a sales tax of 5.5 percent applies to the sale of a vehicle. 

In addition, motorists will have to pay state taxes on gasoline and diesel and federal taxes. Nebraska taxes gasoline, ethanol and diesel at 24.80 cents per gallon. 

Nebraska estate tax 

Nebraska has no state estate tax, though any Nebraskans who leave an estate of over $12.92 million in 2023 must pay a federal estate tax. 

However, Nebraska has an inheritance tax which puts different types of inheritors into categories. There are three types of inheritors. These are immediate relatives, remote relatives and others. 

Surviving spouses are exempt from inheritance tax, no matter the amount they inherit from the deceased. 

Let’s look at how inheritance tax applies to those groups.

Immediate relative (includes siblings, parents, grandparents, children, and grandchildren):

Remote relative (includes nieces, nephews, aunts, and uncles):

Others (anyone receiving inheritance who doesn’t fall into the first two categories):

Nebraska retirement tax 

Retirement income in Nebraska, including Social Security, is taxed as regular income.  

The only deduction Nebraska offers on retirement income applies to military retirement income.  

Adding Nebraska’s relatively high property and inheritance taxes into the equation, some seniors might look to retire in other states with more lenient tax allowances for retirees.  

For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.    

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